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Do Most Estate Planning Attorneys Understand Special Needs Trusts?


Most attorneys who do estate planning, have at least a basic knowledge of special needs trusts. They generally do a fine job. What they do not have is the experience in dealing with the administration phase, and working with people who are administering the special needs trust. This situation gives the attorney the ability to see potential pitfalls, and problems that may arise. They can address those at the time they are drafting the documents. I think most attorneys have a basic knowledge of special needs trusts, and just do not have the experience that might make them better able to address the needs proactively, and avoid problems in the future.

How Can Someone Ensure That The Funds Allocated In A Special Needs Trust Are Not Misused?

Careful selection of a trustee will avoid misused funds with these special needs trusts. It is critically important that the person who is chosen as the trustee is not only trustworthy, but also competent, and has some experience with managing assets, and accounting for the assets. Other ways would be to hire professional trustees, directly, or indirectly through a pooled trust, or have a protector trustee, such as a family member. The protector can be sort of a watchdog, and keep an eye on the trustee’s spending and record keeping. This makes the trustee accountable to someone on a regular basis, and to make sure things are going well. Some larger trusts will even have a protector committee; there will be multiple family members who will oversee, and review the trustee’s actions.

Why Is It Critical To Choose The Right Trustee In A Special Needs Trust?

Because being a trustee of a special needs trust is harder than people think. It may last for such a long time potentially. The trustee for the special needs trust is responsible for managing the assets. They are responsible for accounting all of the income, expenses, and for the gains and losses within the trust. They are responsible for filing tax returns, and for giving accountings of all transactions. They may be contingent beneficiaries with potentially all the decision making when the assets can be used for the beneficiary, and how much of the assets can be used at any given time. The potential conflicts of interest, and successor beneficiaries, or contingent beneficiaries of the trust also come into play. In addition to that, if this trustee does something wrong in the investment, management, or distribution of the assets, it could cause a loss of benefits for the beneficiary, even with the trust in place if it is not managed correctly.

Additional Information About Special Needs Trusts In California

I want to talk about the asset protection benefits of special needs trusts, because at some point in time they become irrevocable. Generally, even a third party trust becomes irrevocable at the death of the donors. As an irrevocable trust, they give tremendous asset protection. If there is a liability for that disabled beneficiary, these trust assets are not used to cover that liability. This gives great asset protection. In fact, it can work while the grantors are still living, if they contribute some funds into that trust irrevocably, and make that trust irrevocable then those assets are protected even during the grantor’s lifetime. They can never be claimed by anyone else other than the special needs beneficiary.

There are also provisions that allow for a beneficiary’s distribution into a special needs trust only if they are presently receiving means tested public benefits. These are contingency clauses. If there is a child who is not currently receiving means tested government benefits, but there is a potential that they would be in the future, we can include this clause, so that at the time of the parents’ death, the child can receive those benefits. The trustee could transfer that child’s share of the inheritance into a special needs trust so it would not cause a problem. That is allowable under current laws.

For more information on Understanding Special Needs Trusts, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (626) 385-6303 today.

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